It’s been all over the news this weekend that eBay only paid around £1.2 million in tax in the UK for 2010, on total sales across it’s four UK subsidiaries of almost £800 million.
eBay aren’t the first to be highlighted for paying low UK taxes, Amazon, Apple, Facebook, Google and Starbucks have all recently been in the news for doing the same. However the taxes paid aren’t the whole story.
This is the corporation tax, it doesn’t take into account tax bills such as income tax national insurance etc and the media also tend to forget that we’re in the EU. eBay have chosen to headquarter themselves in Luxembourg and Switzerland where corporation tax is lower as is VAT.
Certainly choosing where to base a company for tax purposes isn’t a practical option for many of the businesses that trade on eBay, but it shouldn’t be forgotten that it’s our government that’s given these companies the loopholes to lower their taxes in this manner. For years companies like Play.com and Amazon have had operations based in the Channel Islands for just such a reason, although that location isn’t as attractive as it was in the past.
The question you have to ask is why aren’t the companies choosing to base themselves in the UK? Luxembourg is part of the EU, and yet has much lower rates of tax. Companies have to base themselves somewhere within the EU, and when it’s an international and in fact a global company, they’re going to plump for the country that gives them the most advantageous tax arrangements.
There’s absolutely no question that eBay and other companies aren’t paying all the taxes due in the UK, the EU and the rest of the world, it’s just that their financial arrangements make UK taxes low.
The EU was touted as breaking down borders and allowing the sale and purchases of goods and services across national borders without restriction. It’s not working too well though, for example very few people purchase for instance home buildings and contents insurance from the EU rather than a UK based company.
The media shouldn’t be asking why companies are paying so little tax within the UK. They should be asking a more fundamental question which is why aren’t the same companies choosing to base themselves in the UK and pay UK taxes, why isn’t the UK an attractive place to do business?
9 Responses
Yes!!!
Why dont they chase Ebay for the tax rather then run the e markets disclosure.
Surley this would generate more income than chasing the sellers on ebay that are trying to make some money and live day to day.
The entire tax ecosystem is corrupt and no one really complies. The big boys like eBay and Amazon base themselves outside the UK and save themselves millions whilst some big sellers on these marketplaces turn millions in turnover and have dormant companies. Good luck for all! If all companies including eBay sellers paid more tax, then we’d be encouraging the government to rage more wars against other countries in the name of freedom and national security! Let it be as it is and let’s leave the press to investigate and fill up their columns.
Unlike Amazon ebay only sell services, not products. It would be possible for them to run their full .co.uk business with very minimal staffing in the UK.
Outsourcing of the UK staff jobs would reduce tax revenue further.
The UK based sellers should pay the appropriate rate of business taxation.
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I suspect there will need to be a major change in the UK taxation system in the near future to close the loopholes regarding offshore parents and royalties.
What Whirly said, it may stink but there is nothing illegal in avoidance. Evasion is a different kettle of fish.
@ Chris: Maybe when Luxembourg has the infrastructure, physical, military and organizational (their entire military is around 900) to support that Britain does, they will raise their tax rates.
Not to worry though, they don’t pay much in taxes in the US either
Let’s not forget that whilst they are allowed to behave in this manner (and I can see this loophole being closed soon enough both here and in the EU) we, the ordinary everyday people, are making up the shortfall in the taxman’s income. If they and their like, paid full unavoided tax, ordinary Joe public like us would not have to make up the shortfall.